Despite earlier losses, the US stock market made a significant recovery as traders flocked to some of the world’s largest technology firms, viewed as a reliable haven amidst economic uncertainty and market volatility. In the wake of recent banking instability, these technology stalwarts have generally outperformed other sectors. Despite Treasury Secretary Janet Yellen’s assurances to lawmakers that further steps would be taken to safeguard deposits, banks experienced a decline in value. It is notable that, in the last week, banks only slightly reduced their borrowings from two Federal Reserve backstop facilities, indicating that financial institutions are taking advantage of the central bank’s liquidity in the aftermath of recent market upheaval.
Mega-cap technology firms such as Apple Inc. and Microsoft Corp. saw gains that brought the Nasdaq 100 close to a bull market, rising almost 20% from its December low. Meanwhile, the S&P500 remained largely unchanged on Thursday, with only two out of eleven stocks showing positive performance. Communication services and information technology, however, experienced a rally, with gains of 1.83% and 1.65% respectively. The Dow Jones Industrial Average also edged higher by 0.2%, and the MSCI world index saw a 0.5% rise on Thursday.
Main Pairs Movement
On Thursday, the dollar bounced back after earlier losses when the U.S. Federal Reserve hinted that it might not increase interest rates anytime soon. Meanwhile, the Swiss National Bank and Bank of England continued with their plans to raise interest rates. The DXY index spent most of the day fluctuating between 102.0 and 102.65, eventually closing at 102.6.
The EUR/USD, which had been on a five-day winning streak, lost ground as the U.S. Dollar regained strength. Towards the end of the Wall Street session, concerns over the banking industry sent Treasury bonds and the dollar higher, resulting in a drop for the pair. Although it had reached a high of 1.0933 earlier in the European session, it fell below 1.0830 in New York, losing most of the gains made after the FOMC meeting.
Gold prices continued to surge higher and traded around $1,995 per troy ounce on Thursday. The XAU/USD pair extended its post-Fed rally as the U.S. central bank hinted at a dovish approach during its Wednesday meeting, causing a sell-off of the dollar. The pair saw fresh activity during the early American trading session and closed with a daily gain of 1.18%.
Technical Analysis
EURUSD (4-Hour Chart)
On Thursday, the EUR/USD pair initially climbed to a multi-week high of around 1.0930 after the release of US data. However, the pair lost its bullish momentum and retreated below 1.0900, currently trading at 1.0893, with a daily gain of 0.36%. The US Dollar’s weakness across the board due to falling US Treasury bond yields and risk flows, following the Fed’s dovish stance, has kept the EUR/USD pair in positive territory.
After the Fed’s March policy meeting, the US Dollar continued to weaken as the central bank raised its policy rate by 25 basis points to the range of 4.75-5%. In the US economic calendar, the US weekly initial jobless claims fell to 191K in the week ending March 18, which was better than the market’s expectations and suggests a stronger labor market than anticipated. In contrast, the consumer sentiment in the Eurozone weakened slightly with the Consumer Confidence Indicator decreasing to -19.2.
From a technical perspective, the RSI indicator sits at 758 indicating possible short-term corrections. However, the price has maintained its upside momentum, moving alongside the upper band of the Bollinger Bands. Hence, a continuation of the uptrend can be expected. Overall, the market may turn slightly bearish as long as the resistance line at 1.0903 holds. If the pair breaks above this resistance, further advances toward 1.0962 are possible.
Resistance: 1.0903, 1.0962
Support: 1.0798, 1.0735
XAUUSD (4-Hour Chart)
During Thursday’s trading session, XAUUSD experienced a 1.24% increase, rebounding strongly after a brief dip due to lower-than-expected jobless claims. Traders bought the dip after the release of Initial Jobless Claims data, which showed that fewer Americans are signing up for unemployment benefits than anticipated, causing a spike lower. As of now, XAU/USD is trading up on the day at $1,994.
Gold prices rose significantly after the March FOMC meeting on Wednesday when the US Federal Reserve suggested that tighter credit conditions due to banking stress could help bring down inflation. The next significant release on the economic calendar for XAUUSD will likely be the US Durable Goods Orders, which track the sale of big-ticket items. This data is scheduled for release on Friday, March 24, at 12:30 GMT and is expected to show a 0.6% rise in MoM in February from the previous month -4.5%. The core figure, which excludes transportation and defense, will also be of interest to investors, with the former expected to rise by 0.2% and the latter by 0.0%.
From a technical perspective, the uptrend that began at the start of March remains intact, as reflected in the 4-hour chart above. The underside of the just-broken trendline is likely to provide an initial target and resistance at $1,991, and the Gold price will probably pull back at that level. However, an eventual rally all the way to the yearly highs at $2,010 is quite possible. An upside break will call for a test of Tuesday’s high at $1,985, above which the $2,000 round figure will be challenged.
